One of the most celebrated Hollywood films of last year has a curious connection to Costa Rica, Florida, Wall Street, and an outlandish financial scam. The film is The Wolf of Wall Street, a biopic directed by Martin Scorsese and starring Leonardo DiCaprio as Jordan Belfort. The connection is Ira Lee Sorkin, a renowned attorney who once represented Mr. Belfort and later Bernard Madoff. Mr. Sorkin also represented Joel Nadel, a man who once promoted Goldcor, a company that claimed it could extract gold from beach sand in Costa Rica.

The different-colored sands of Guanacaste’s beaches in the northern Pacific coast of Costa Rica are the stuff of legend. Playa Hermosa, for example, has two kilometers of volcanic dark sand that glitters spectacularly when the sun hits at a certain angle. If you tilt your head and squint your eyes the right way, you will swear that gold specks are strewn about the beach. The sands of the beaches to the north and south are different in color but similar in glitter, and none of this indicates the presence of gold.

The Goldcor Flimflam

Sometime in the 1980s, a company named Tarsand Petroleum began to morph into Goldcor of Daytona Beach. A few Goldcor principals and investors were Mormons and born-again Christians from Florida and Utah. To attract devoted Christian investors, Goldcor’s principals claimed that they had:

invented a process to turn a 20-mile strip of black volcanic Costa Rican beach sand into gold.

“The sands that are removed from the beach are replenished by tidal action only after a few days,” wrote Nadel, who was not a partner in Goldcor. The scam was so elaborate that, according to The Washington Post, Goldcor’s principals flew prospective investors to Costa Rica in Learjets so they could visit the company’s laboratories and watch white-coated scientists turn sand into gold.

The relation between black sand and gold prospecting predates the arrival of Spanish conquistadors to the Americas. It is part of placer mining, which has been practiced in Costa Rica with less-than-stellar results. Black sand may contain heavy materials, including iron pyrite (fool’s gold) and iron ore (which some people think is a rare-earth element even though its atomic number is not in the proper range). Black sand is heavy, or at least heavier than gold and thus easy to separate -at least in theory.

An amazing 1989 article in the Orlando Sentinel shed some light into the lucubrate Goldcor confidence game in Costa Rica:

Professional investors, including stockbrokers and editors of financial newsletters, accepted free trips to visit Goldcor’s plant in Costa Rica. Some of those visitors later recommended Goldcor stock. Among them were Joel Nadel, publisher of Confidential: Report from Zurich in Boca Raton, and Victor Vanden Oever, a former Orlando broker for Drexel Burnham Lambert Inc.

”The main element con artists rely on is greed,” said Roberto Veitia, publisher of Investigate, a financial newsletter based in Orlando. After Veitia toured Goldcor’s plant in Costa Rica, he recommended against the stock. ”When you see something that stirs up your greed so readily, that should be a red flag that something’s wrong. The Midas touch has been around for a long time.”

He was not necessarily skeptical of ”a new process” for refining gold from sand, Veitia said, but he thought it odd that Goldcor’s plant was closer to the airport than to the beach. Fluent in Spanish, Veitia learned from employees that they did not work full time for the company. He also consulted with some Costa Rican lawyers who said Goldcor did not have mining rights on the coast.

Assuming that Goldcor investors were being flown into the Juan Santamaria International Airport (SJO) in Alajuela or Tobias Bolanos in Pavas (SYQ), they more than likely never visited Playas del Coco or any other beach for that matter. Some investors told the Orlando Sentinel that they had suspicions:

Ferrell also remembers some clues that would have alerted him of danger had he been more skeptical. Although the plant was mining big mounds of sand, it was very clean, he recalled, and some of the secretaries were chatting idly.

”I should have asked, ‘Do you work here six days a week?’ ” Ferrell said. ”Forget the corporate officers. Forget the brokers. Talk to the employees before you get into the company.”

A few years after the United States Securities and Exchange Commisssion (SEC) investigated Goldcor, the financial newsletter industry and Wall Street came under heavy scrutiny due to media reports such as the following:

To win over skeptics, Florida entrepreneur Brown and his associate Martin flew groups to Costa Rica by Learjet for tours of the Goldcor plant. They took brokers and investors beyond the chain-link fence and the guard dogs, past rows of 10-foot vats, into the laboratory where they watched as men in white coats purported to extract gold from the black volcanic sand of a Costa Rican beach using a secret chemical process developed by Goldcor. It was all an elaborate hoax (The Washington Post, 1991)

The defunct company, Goldcor Inc. of Daytona Beach, bilked about 3,000 investors out of as much as $50 million by falsely claiming it had developed a successful gold-extraction process in the 1980s, authorities said. (The Boston Globe, 1992)

F. D. Roberts & Company, a penny-stock brokerage that promoted a host of other dubious companies, including Goldcor, a phony enterprise that boasted of being able to extract gold from Costa Rican beach sand. Investors, hooked by hyperbole and high-pressure telephone sales tactics typical of boiler-room operations, lost at least $50 million when Goldcor collapsed in 1988. (The New York Times, 1992)

To this day, there are no reports to indicate that the black-sandy beaches of Costa Rica could produce gold. For all we know, it might be easier to mine for Bitcoin. The Guanacaste region where these beaches are located, however, is attracting foreign investors with dollar signs in their eyes. Instead of the unlikely promise of gold from sand, these investors are being sold on the potential riches of real estate and tourism, which thus far have proven to be more tangible than what Goldcor offered.

The Wolf of Wall Street was nominated for various Academy Awards and helped Mr. DiCaprio win a Golden Globe.  You can watch the trailer here.  The film was produced by DiCaprio’s own Appian Way, which also produced Runner, Runner -a film that features Costa Rica as its fictional backdrop.